1. Creating Competitive Advantage18

2. Learning Objectives
After studying this chapter, you should be able to:
Discuss the need to understand competitors as well as customers through competitor analysis
Explain the fundamentals of competitive marketing strategies based on creating value for customers
Illustrate the need for balancing customer and competitor orientations in becoming a truly market-centered organization

3. Chapter Outline Competitor Analysis Competitive Strategies
Balancing Customer and Competitor Orientations

4. Competitor Analysis
Competitor analysis is the process of identifying, assessing, and selecting key competitors

5. Identifying Competitors
Competitor Analysis
Identifying Competitors
Competitors can include:
All firms making the same product or class of products
All firms making products that supply the same service
All firms competing for the same consumer dollars

6. Identifying Competitors
Competitor Analysis
Identifying Competitors
Competitive advantage is an advantage over competitors gained by offering consumers greater value than competitors offer
Competitor myopia refers to a firm focusing on what it considers to be its direct competition and not being aware of indirect or new competitors

7. Identifying Competitors
Competitor Analysis
Identifying Competitors
Industry point of view refers to competitors within the same industry
Market point of view refers to competitors trying to satisfy the same customer need or building relationships with the same customer group

8. Identifying Competitors
Competitor Analysis
Identifying Competitors
Market point of view is considered to provide a broader set of actual and potential competitors and a competitor map illustrates the steps buyers take in obtaining the product

9. Identifying Competitors
Competitor Analysis
Identifying Competitors

10. Identifying Competitors
Competitor Analysis
Identifying Competitors
Competitor map highlights both competitive opportunities and challenges facing the firm
Center is the list of consumer activities
First outer ring lists main competitors
Second outer ring lists indirect competitors

11. Assessing Competitors
Competitor Analysis
Assessing Competitors
Competitor’s objectives
Competitor’s strategies
Competitor’s strengths and weaknesses
Competitor’s actions and reactions

12. Determining Competitor’s Objectives
Competitor Analysis
Determining Competitor’s Objectives
Competitor’s objectives include:
Profitability
Market share growth
Cash flow
Technological leadership
Service leadership

13. Identifying Competitor’s Strategies
Competitor Analysis
Identifying Competitor’s Strategies
A strategic group is a group of firms in an industry following the same or similar strategy in a given target market
Competition is most intense within a strategic group
Competition among strategic groups due to overlapping customers, lack of perceived differentiation, and expansion of one strategic group into new segments

14. Identifying Competitor’s Strategies
Competitor Analysis
Identifying Competitor’s Strategies
Companies need to understand the competitor’s
ability to deliver value to its customers
Product quality
Product features
Customer service
Pricing policy
Distribution coverage
Sales force strategy
Promotion programs
Financial strategies
R&D

15. Assessing Competitor’s Strengths and Weaknesses
Competitor Analysis
Assessing Competitor’s Strengths and Weaknesses
Primary data
Secondary data
Personal experience
Word of mouth
Benchmarking is the comparison of the company’s products or services to competitors or leaders in other industries to find ways to improve quality and performance

16. Estimating Competitor’s Reactions
Competitor Analysis
Estimating Competitor’s Reactions
Marketing managers need to develop an understanding of a given competitor’s mentality, culture, values, and way of doing business to anticipate how the competitor will react to the company’s marketing strategies

17. Selecting Competitors to Attack and Avoid
Competitor Analysis
Selecting Competitors to Attack and Avoid
Customer value analysis determines the benefits that target customers’ value and how customers rate the relative value of various competitors’ offers.
Identification of major attributes that customers value and the importance of these values
Assessment of the company’s and competitors’ performance on the valued attributes

18. Good or Bad Competitors
Competitor Analysis
Good or Bad Competitors
Good competitors:
Increase total demand
Share costs of market and product development
Legitimize new technologies
Serve less attractive market segments
Provide more product differentiation
Lower the anti-trust risk
Improve bargaining power versus legislators and regulators

19. Good or Bad Competitors
Competitor Analysis
Good or Bad Competitors
Bad competitors:
Try to share rather than earn in the market
Take large risks
Create disruption

20. Designing a Competitive Intelligence System
Competitor Analysis
Designing a Competitive Intelligence System
Identifies competitive information and the best sources of this information
Continually collects information
Checks information for validity and reliability
Interprets information
Organizes information
Sends key information to relevant decision makers
Responds to inquiries about competitors

21. Competitive Strategies
Approaches to Marketing Strategy
Stages of approaches to marketing strategy include:
Entrepreneurial marketing
Formulated marketing
Intrepreneurial marketing

22. Competitive Strategies
Approaches to Marketing Strategy
Entrepreneurial marketing involves visualizing an opportunity and constructing and implementing flexible strategies
Formulated marketing involves developing formal marketing strategies and following them closely
Intrepreneurial marketing involves the attempt to reestablish an internal entrepreneurial spirit and refresh marketing strategies and approaches

23. Competitive Strategies
Basic Competitive Strategies
Michael Porter’s four basic competitive positioning strategies
Overall cost leadership
Differentiation
Focus
Middle of the road

24. Competitive Strategies
Basic Competitive Strategies
Overall cost leadership strategy is when a company achieves the lowest production and distribution costs and allows it to lower its prices and gain market share

25. Competitive Strategies
Basic Competitive Strategies
Differentiation strategy is when a company concentrates on creating a highly differentiated product line and marketing program so it comes across as an industry class leader
Focus strategy is when a company focuses its effort on serving few market segments well rather than going after the whole market

26. Competitive Strategies
Basic Competitive Strategies
Porter believed that a company that pursued a clear strategy would achieve superior performance and that companies without a clear strategy would not succeed
Porter considered this to be “middle of the road”

27. Competitive Strategies
Basic Competitive Strategies
Michael Treacy and Fred Wiersema suggest companies can gain leadership positions by delivering superior value to their customers in three strategies or “value disciplines”:
Operational excellence
Customer intimacy
Product leadership

28. Competitive Strategies
Basic Competitive Strategies
Operational excellence refers to a company providing value by leading its industry in price and convenience by reducing costs and creating a lean and efficient value delivery system

29. Competitive Strategies
Basic Competitive Strategies
Customer intimacy refers to a company providing superior value by segmenting markets and tailoring products or services to match the needs of the targeted customers

30. Competitive Strategies
Basic Competitive Strategies
Product leadership refers to a company providing superior value by offering a continuous stream of leading-edge products or services. Product leaders are open to new ideas and solutions and bring them quickly to the market.

31. Competitive Strategies
Competitive Positions
Market leader strategies
Market challenger strategies
Market follower strategies
Market nicher strategies

32. Table 18.1 Strategies for Market Leaders, Challengers, Followers, and Nichers

33. Competitive Strategies
Competitive Positions
Market leader is the firm with the largest market share and leads the market price changes, product innovations, distribution coverage, and promotion spending
Market challengers are firms fighting to increase market share

34. Competitive Strategies
Competitive Positions
Market followers are firms that want to hold onto their market share
Market nichers are firms that serve small market segments not being pursued by other firms

35. Competitive Strategies
Competitive Positions

36. Competitive Strategies
Market Leader Strategies
Expand total demand
Protect their current market
Expand market share

37. Competitive Strategies
Market Leader Strategies
Expanding Total Demand
Expand total demand by developing:
New users
New uses
More usage of its products

38. Competitive Strategies
Market Leader Strategies
Protecting Market Share
Protect current market by:
Fixing or preventing weaknesses that provide opportunities to competitors
Maintain consistent prices that provide value
Keep strong customer relationships
Continuous innovation

39. Competitive Strategies
Market Leader Strategies
Expanding Market Share
Expand market share by:
Increasing profitability with increasing market share in served markets
Producing high-quality products
Creating good service experiences
Building close relationships

40. Competitive Strategies
Market Challenger Strategies
Challenge the leader with an aggressive bid for more market share
Play along with competitors and not rock the boat

41. Competitive Strategies
Market Follower Strategies
Second mover advantage occurs when a market follower observes what has made the leader successful and improves on it
Challenges firms its own size or smaller

42. Competitive Strategies
Market Nicher Strategies
Ideal market niche is big enough to be profitable with high growth potential and has little interest from competitors
Key to market niching is specialization
Market
Customer
Product
Marketing mix

43. Balancing Customer and Competitor Orientations
Companies need to continuously adapt strategies to changes in the competitive environment
Competitor-centered company
Customer-centered company
Market-centered company

44. Balancing Customer and Competitor Orientations
Competitor-centered company spends most of its time tracking competitor’s moves and market shares and trying to find ways to counter them
Advantage is that the company is a fighter
Disadvantage is that the company is reactive

45. Balancing Customer and Competitor Orientations
Customer-centered company spends most of its time focusing on customer developments in designing strategies
Provides a better position than competitor-centered company to identify opportunities and build customer relationships

46. Balancing Customer and Competitor Orientations
Market-centered company spends most of its time focusing on both competitor and customer developments in designing strategies

47. Balancing Customer and Competitor Orientations

48. Discussion Question
Washington Mutual (WaMu) has achieved remarkable success but understands its target customers’ needs and develops a marketing strategy to meet those needs. As other banks start to copy their services, WaMu may have to modify this strategy.
What do you think they can do to sustain the advantage they developed?

49. Review Questions
Discuss the need to understand competitors as well as customers through competitor analysis
Explain the fundamentals of competitive marketing strategies based on creating value for customers
Illustrate the need for balancing customer and competitor orientations in becoming a truly market-centered organization

50. PowerPoint created by:
Ronald Heimler
Dowling College, MBA
Georgetown University, BS Business Administration
Adjunct Professor, LIM College, NY
Adjunct Professor, Long Island University, NY
Lecturer, California Polytechnic State University, Pomona, CA
President, Walter Heimler, Inc.